A CASE STUDY ON STORM GUDRUN: MANAGING A CRISIS

INVENTORY MANAGEMENT

Submitted to Habiba Abbasi Submitted by Vinit Kumar Singh PGP2010-2424 Group 1

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Forestry in Sweden
Forestry has been an important natural resource of Sweden of about 9 million inhabitants in northern Europe; although only 2.5% of the work force in only employed. In 2005, timber and other forest-based products constituted 12% of Swedens exports. Leif Broden, president and CEO of Sodra describes forestry as an Anonymous industry.

There are many national as well as local organizations entailed with this industry. Ministry of Industry, Ministry of Environment, National Board of Trade, Swedish Society for Nature & Conservation, Swedish Forest Industries Federation are to name a few. These forests were an important part of the tradition and lives of Sweden. With an increase in environmental pressure to preserve forests, thre was now a dual goal set for forestry: Profits & Preservation.

The variable Swedish climate had an impact on the trees growth. The growth of trees in north took approximately 120 days where as it was 240 days in south. Swedish forests were 85% confer and 15% were deciduous.

Percentage

Norway Spruce 45%

Pine 39%

Other 6%

Birch 10%

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Forestry Products
y y y y Tree trunks: processed into sawn Planed timber: used in building industry & lumbar yards Young tree branches: pulp and paper production Waste material (sawdust): fuel pallets

The value of the wood was determined by the type and dimension of the wood. However, in paper production, the freshness of the wood was the most important factor in determining the cost. Also, demands of different geographical market also affected price and quality assignation.

Managing the Supply Chain

Generally, forest falling was done in the winter season as it was easier to transport woods on frozen ground than dry land. Waterways were an important means of timber transportation. Due to seasonal falling, the keeping logs were very important. There was also threat of deterioration of the woods in log term. However, modern forest felling took place throughout the year and thereby reducing the damage to the woods in storage. In Sweden, the timber was normally bought on the roots: the buyer and not the seller were responsible for felling and transportation. Forest machines cleared the fallen woods. The timber was then brought to and temporarily stored at the side of the road and was further transported to the mills and paper and pulp industries in the region. For further distance, boats and railways were used.

Market Actors in Smaland

Smaland, Sweden was known for the deep forests that covered 70% of this southern region and a center for forest-related industries. Forests in Smaland were owned by families and private. The buyer has to deal with large numbers of suppliers to safeguard their purchase quantities. This was because demand exceeded supply. Timber buyers tried to establish and manage long-term relationship with the suppliers by offering different types of services. According to Olofsson, service operations has become ever more important as a means of competition.we provide advice regarding forest management, such as plant procurement or forest maintenance.

Gudrun Storm: Managing the Crisis Vida

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Vida was a privately owned, large sawmill corporation located in the city of Alvesta, close to Vaxjo, Smaland. It has a total of 620 employees and a yearly turnover of SEK 2.7bn. It produced 1025 cubic mt of sawn and planed timber each year. Its main product was limber for building and construction. Vida sold roof-truss timber and joists for construction purposes to packaging solutions and products for energy production. The company transported through rail cargo. Vida has 11 production sites in Smaland and Vastra Gotaland. The company procured its raw materials from 7000 predominantly local suppliers. Vida exported 90% of its products to Europe, US and Asia.

Sodra Sodra was based in southern Sweden with net sales of SEK 16bn and 3500 employees. It was headquartered in Vaxjo in Smaland. The company was divided into 5 main areas of producing: 1. 2. 3. 4. 5. Sodra Skog: delivering saw logs and pulp wood to Sodras mills and industry Sodra Cell: produced pulp for European market Sodra Timber: manufacture timber for construction Gapro: produced interior wood and MDF products Sodra Skogsenergi: supplied pellets and other energy products for power plants

Sydved Sydved was the wood procurement organization for Stora Enso group and Munksjo in southern Sweden. Stona Enso was one of the worlds leading forest companies producing paper and other products. Sydved had 150 people and a yearly turnover of SEK 2.5bn. Procurement at Sydved was organized in 2 regions, and it dealt primarily with local suppliers. Sydved tried to build relationship with with its suppliers.

A Stormy Night in January

On 8th January05, the storm Gudrun with the speed of 46 meters per second, struck Sweden and much of northern Europe. It affected people and property a lot. About 200mn trees were felled in one night, amounting to 75mn cubic meters of material, the equivalent of 1500 hectares of land covered with debris 5 meters high. The debris was so huge

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that it was impossible to clean it for next 4-5 months. The biggest problem that surfaces was where to stock them? Infestations of felled timber could become a breeding ground for attacks on healthy trees. Rot could deteriorate the quality of fallen timber. Even if timber was saved from insects, the drying wood and clearing equipment would pose a fire hazard.

Customer Needs
The situation for the forest companies was paradoxical. Timber supplies abounded, but nobody really know what types of trees were in the mix that had fallen and, consequently, what type of production they were most suitable. This was due to the fact that for efficiency reasons the stock levels that industries normally maintained at their plants were adjusted to last days rather than weeks of production. Supply crisis was one of the consequences of storm as forest companies didnt knew how to access the right timber to the right customers. The glut in wood supply was presumed to be reflected in radically lowered prices. This expectation constituted a complication for the forest companies because, although they might demand lowered prices from their suppliers, they also had to take into consideration of the costs of processing and transportation of the felled woods that would increase. Another problem was the degree to which the surplus supply would actually translate into lowered prices.

Supplier Needs
After the storm, there were people visiting the buyers asking them to purchase their felled trees. The owners lost their livelihood. Everyone knew that when the weather got warmer, the quality of timber would fall.

The Course of Action

The storm had left trees fallen across electricity mains and phone lines; people were stuck on their farms with no electricity and no means of communication; everybody needed help to clear the trees away.

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First, machine operators needed to get off their farms and then find a way to the forest machines. And the machines needed to be cleared before they could be brought to other sites, not to mention that a place was needed t store the timber. The Gudrun storm left forest owners and lumber industry competitors devastated. Johansson should take following measure to ensure the safety of the fallen woods from getting infected from insects and getting rotted: 1. They should try to get their forest machines in working condition as soon as possible. 2. They should contact their current suppliers and advise them to apply pesticides to keep off the insects. However, this would not help much but it will keep a certain timber safe. 3. They should ask their suppliers to cover the fallen timbers which are still not infected. 4. They should build a pool filled with water to keep the fallen timbers in it. This would save timbers from warm conditions. 5. They should build a temporary storage facility built near to their suppliers farm from the fallen timbers to store the remaining fallen timbers.